What is the Total Fund Deposit?
The Total Fund Deposit amount (TFD) is the amount of money set in a Biodiversity Stewardship Agreement (BSA) to cover future land management costs. Total Fund Deposits are paid into the Biodiversity Stewardship Payments Fund (BSPF) when credits are sold. Through the Biodiversity Conservation Trust, this fund then makes annual payments to the landholder to cover costs of land management under the Biodiversity Stewardship Agreement management plan. The Biodiversity Conservation Trust is responsible for managing and investing the funds held in the Biodiversity Stewardship Payments Fund.
What is the discount rate for Total Fund Deposits?
Under the Biodiversity Conservation Act 2016, the department determines the Total Fund Deposit amount. This is calculated as the amount of money that needs to be invested now to fund the agreed management actions at a Biodiversity Stewardship Agreement site into the future. A discount rate is used in the formula to work out how to cost land management over time. The discount rate is regularly reviewed based on advice from financial experts.
The department uses the following formula to determine the discount rate:
rate of return
|–||Biodiversity Conservation Trust costs of managing the BSPF||–||Minister's risk tolerance margin||=||TFD discount rate|
The discount rate is regularly reviewed to ensure that it reflects long-term return forecasts for the Biodiversity Stewardship Payments Fund, management costs and risk tolerance.
The most recent review was undertaken in July 2022, where it was determined to increase the discount rate from 2.6% to 3.2%. An increase in the discount rate means a decrease in the amount of the Total Fund Deposit payment.
The revised discount rate will apply to all Biodiversity Stewardship Agreements entered into from 15 August 2022.